Finance Security、National Interest and Foreign exchange reserves Optimization
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| Title | Finance Security、National Interest and Foreign exchange reserves Optimization
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| Author | Luo Sumei, Zhou Guangyou and Zeng Yao |
| Organization | School of Finance, Shanghai University of Finance and Economics; Institute for Financial Studies, Fudan University |
| Email | luosumei@mail.shufe.edu.cn |
| Key Words | Foreign Exchange Reserves; Finance Security; National Interest; Security First Principle; Optimal ManagementLuo Sumeia, Zhou Guangyoub and Zeng Yao |
| Abstract | In the background of current implementation of “one belt one road” strategy and the continuous depreciation risk of our country’s huge foreign exchange reserve holdings, to explore new ways of using foreign exchange reserves and fully play its special role in safeguarding financial security and achieving national interests, are of great significance .From the perspective of financial security and national interests，firstly，this paper classify foreign exchange reserves into the financial security and national interests reserves according to the demand theory of foreign exchange reserves. Secondly，we attempt to introduce security first principle，build optimal allocation model which is based on the financial security of foreign exchange reserves. Thirdly, by solving the theoretical model and numerical simulation, we measure out the size of financial security and national interests reserves, also optimize them. It shows that currently about 15% of foreign exchange reserves can be used to satisfy the financial security need, while the remaining 85% can be used to achieve the national interest. This paper argues that foreign exchange reserves，as the country's financial assets，should be used primarily to safeguard national financial security and achieve national strategic interests and economic interests. Foreign exchange reserves can be docked with “one belt one road” strategy，to support the internationalization of RMB and support enterprises to "go out", and to promote foreign direct investment and so on. Redundant reserves can also be abolished in this process. Therefore, in the current foreign exchange reserves management system, the efficiency problem，rather than the size problem should be the focus point，also there is no need to suppress the increase of foreign exchange reserves actively. |
| Serial Number | WP916 |
| Time | 2015-08-18 |
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